To Repeal or Not Repeal: The Johnson Amendment

Transcription

1 To Repeal or Not Repeal: The Johnson Amendment MARK A. GOLDFEDER & MICHELLE K. TERRY* I. INTRODUCTION II. THE HISTORY AND APPLICATION OF THE JOHNSON AMENDMENT A. Development and Passage B. Attempts to and Possible Consequences of Amending the Johnson Amendment C. Modern Interpretation and Enforcement of the Johnson Amendment IRS Guidance and Practice IRS Enforcement of Violations Current and Recent Litigation Resulting in Revocation of Tax-Exempt Status of Church Situations That Did Not Result in Revocation of Church s Tax-Exempt Status D. ADF Pulpit Initiative III. CONSTITUTIONALITY OF THE JOHNSON AMENDMENT A. The Religion Clauses Arguments B. Free Speech The Johnson Amendment and Free Speech Citizens United & Its Implications for the Johnson Amendment Government Speech and Viewpoint Discrimination C. Unconstitutional Conditions IV. ALTERNATIVE FORWARD-LOOKING PROPOSALS A. Further IRS Guidance B. Repeal or Amend the Johnson Amendment C. The Executive Option V. CONCLUSION

2 210 The University of Memphis Law Review Vol. 48 I. INTRODUCTION An unconditional right to say what one pleases about public affairs is what I consider to be the minimum guarantee of the First Amendment. 1 In a recent address to the National Prayer Breakfast, President Donald J. Trump reiterated his promise to get rid of the Johnson Amendment and allow our representatives of faith to speak freely and without fear of retribution. 2 The Johnson Amendment is a piece of 1954 legislation that regulates what tax-exempt organizations including churches and religious institutions can say and do when it comes to politics. The Johnson Amendment states: Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation... and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on * Dr. Mark Goldfeder is Senior Lecturer at Emory University School of Law and Spruill Family Senior Fellow at the Center for the Study of Law and Religion. Michelle K. Terry serves as Senior Litigation Counsel for the American Center for Law and Justice, with a focus in religious liberty and free speech cases. 1. New York Times Co. v. Sullivan, 376 U.S. 254, 297 (1964) (Black, J., concurring). 2. President Donald J. Trump, Remarks at the National Prayer Breakfast (Feb. 2, 2017),

3 2017 To Repeal or Not Repeal 211 behalf of (or in opposition to) any candidate for public office. 3 For decades, there has been fierce debate about the constitutionality and general legality of the Johnson Amendment. Critics say that it limits the free speech and free exercise rights of religious leaders in violation of the First Amendment, 4 while supporters of the status quo believe that the Johnson Amendment is an important part of the separation of church and state, without which churches, charities, and their respective memberships would be left dangerously open to partisan manipulation. 5 In four parts, this Article will take a non-partisan, in-depth look at the issue. Part II will provide a short history of the Johnson Amendment s passage and its subsequent interpretation. Part III will explore the arguments regarding its constitutionality. Part IV will examine some of the current reform and repeal actions being taken. Finally, we offer some practical recommendations for the future. II. THE HISTORY AND APPLICATION OF THE JOHNSON AMENDMENT A. Development and Passage Historically speaking, until the 1960s, our nation had a longstanding practice of church involvement in the political activity of 3. I.R.C. 501(c)(3) (2012). 4. See, e.g., Michelle Terry, How the Johnson Amendment Threatens Churches Freedoms, ACLJ, (last visited Oct. 28, 2017) (quoting Dr. Jay Sekulow, Chief Counsel, ACLJ) ( [T]he 1954 Johnson Amendment [is] a [62]-yearold federal tax law that prevents religious leaders from truly exercising their constitutionally-protected free speech rights when they act in their official capacity as a pastor or head of a religious, tax-exempt organization. ). 5. See, e.g., David Wolpe, A Rabbi Defends the Johnson Amendment, ATLANTIC (Feb. 19, 2017), ( Believe me, once endorsements are permitted, they will become expected.... You may as well affix an elephant or a donkey instead of a cross on your church, because that is how it will be seen a Republican church or a Democratic one. ).

4 212 The University of Memphis Law Review Vol. 48 the day. 6 Proponents of the Johnson Amendment who try to make arguments from tradition (that is, that the Johnson Amendment has been here for a while, and therefore it must be fine) must first acknowledge that it was once commonplace for pastors to preach about political issues and candidates: Historically, churches had frequently and fervently spoken for and against candidates for government office. Such sermons date from the founding of America, including sermons against Thomas Jefferson for being a deist; sermons opposing William Howard Taft as a Unitarian; and sermons opposing Al Smith in the 1928 presidential election. Churches have also been at the forefront of most of the significant societal and governmental changes in our history including ending segregation and child labor and advancing civil rights. 7 In 1862, President Abraham Lincoln and Congress created the position of commissioner of Internal Revenue, whose job was to collect an income tax that would be used to pay for the war. 8 Congress repealed the income tax a decade later, then revived it in 1894, and the Court ruled in 1895 that the income tax was unconstitutional. 9 It was only after Wyoming ratified the 16th Amendment in 1913 that the necessary three-quarter majority of states was met, giving Congress the constitutional authority to enact an income tax. 10 It was in that year 6. See generally JOHN WITTE, JR. & JOEL A. NICHOLS, RELIGION AND THE AMERICAN CONSTITUTIONAL EXPERIMENT (3d ed. 2011) (collecting and summarizing religious liberty cases from 1815 to 2010). 7. ALL. DEF. FUND, THE PULPIT INITIATIVE: EXECUTIVE SUMMARY 1 (2009) [hereinafter PULPIT INITIATIVE EXEC. SUMM.], ates%203_11_10.pdf; accord DAVID L. CHAPPELL, A STONE OF HOPE: PROPHETIC RELIGION AND THE DEATH OF JIM CROW 128 (2004); WALTER I. TRATTNER, CRUSADE FOR THE CHILDREN: A HISTORY OF THE NATIONAL CHILD LABOR COMMITTEE AND CHILD LABOR REFORM IN AMERICA 196 (1970). Cf. also WITTE & NICHOLS, supra note 6, at (explaining the extent to which various sects and officials within them wrote and spoke on religious liberty, a political issue in and of itself). 8. Brief History of IRS, INTERNAL REVENUE SERV., (last updated Aug. 6, 2017). 9. Id. 10. Id.

5 2017 To Repeal or Not Repeal 213 that taxpayers first saw the now-infamous Form 1040, levying a tax of 1% on incomes greater than $3,000 and a 6% surtax on incomes greater than $500, Since then, the Internal Revenue Service ( IRS ) has been responsible for collecting and managing the United States income tax system. 12 The idea of limits on tax exemptions for churches and accompanying restrictions on lobbying activity actually predate Lyndon Johnson s Amendment. Churches first received their taxexempt statuses under the Revenue Act of 1913, and then, in 1934, Congress narrowed the exemption to exclude churches and all nonprofit organizations that participated in lobbying activities. 13 It was only in 1954 that then-senator Lyndon Johnson included the provision that related to elections, 14 which was more pragmatic than ideological. Johnson served as a United States senator from Texas before he became this nation s 36th president. 15 He was the Minority Leader in the Senate in 1953, and when the power shifted from one party to the other in 1954, he became the Democratic Majority Leader. 16 It was on July 2, 1954, that he proposed the addition to the tax provision which now bears his name. 17 The exact portion that Senator Johnson proposed to be added at that time, following the existing tax exemption for charitable organizations, allowed tax exemptions to those organizations which do not influence legislation, and which do[] not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of any candidate for public office. 18 Congress added the words in opposition to after the 11. Id. 12. Id. 13. Roger Colinvaux, The Political Speech of Charities in the Face of Citizens United: A Defense Prohibition, 62 CASE W. RES. L. REV. 685, (2012). 14. J.R. Labbe, Opinion, The First Church of Electioneering?, FORT WORTH STAR-TELEGRAM, Feb. 27, 2008, at D FRANK FREIDEL & HUGH SIDEY, THE PRESIDENTS OF THE UNITED STATES OF AMERICA (2006), reprinted in Lyndon B. Johnson, THE WHITE HOUSE, (last visited Oct. 28, 2017). 16. Id CONG. REC (daily ed. July 2, 1954) (statement of Sen. Johnson). 18. Id.

6 214 The University of Memphis Law Review Vol. 48 words on behalf of in 1987, thus broadening the scope of the prohibition on political activity. 19 When Senator Johnson introduced the amendment, he categorized its changes to the current wording by saying, [T]his amendment seeks to extend the provisions of section 501 of the House bill, denying tax-exempt status to not only those people who influence legislation but also to those who intervene in any political campaign on behalf of any candidate for any public office. 20 Johnson stated that he had met with other high-ranking members of the Senate prior to the introduction of this amendment, and that he under[stood] that the amendment [was] acceptable to them. [He] hope[d] the chairman [would] take it to conference, and that it [would] be included in the final bill which Congress passe[d]. 21 The final note in the Congressional Record concerning the Johnson Amendment states, The amendment was agreed to. 22 The story behind the story is that Johnson was facing re-election that year, and money from tax-exempt organizations funded by out-ofstate donors meant he would be facing strong opposition during the primary. 23 At the time the Johnson Amendment was introduced, Senator Johnson had recently faced political difficulties in his home state from certain organizations. 24 A study by a Purdue sociologist in the late-1990s found that [t]he IRS rule that strips tax exemption from churches engaged in electioneering was born of Lyndon Johnson s Texas politics, not the U.S. Constitution. 25 The organizations that Senator Johnson wanted to silence were the Facts Forum and the Committee for Constitutional Government ( CCG ). 26 These groups were considered the two major anti- 19. Ass n of the Bar of New York v. Comm r, 858 F.2d 876, 879 (1988) CONG. REC (daily ed. July 2, 1954) (statement of Sen. Johnson). 21. Id. 22. Id. 23. GAG ORDER 58 (Gary Cass ed., 2005) (citing BRUCE R. HOPKINS, THE LAW OF TAX-EXEMPT ORGANIZATIONS 327 (6th ed. 1992)). 24. Jay Sekulow, Should Religious Leaders Be Able to Endorse Political Candidates?, ACLJ, (last visited Oct. 28, 2017). 25. Larry Witham, Texas Politics Blamed for 54 IRS Rule LBJ Wanted to Keep Senate Seat, WASH. TIMES, Aug. 27, 1998, at A Id.

7 2017 To Repeal or Not Repeal 215 communist organizations attempting to thwart Senator Johnson s bid for reelection. 27 During this time of McCarthyism and Texas politics, there was no real general election, making the Democratic primary election itself the de facto general election. 28 His opponent was the relatively unknown thirty-something World War II veteran Dudley Dougherty, who was spun as a vehement anti-communist, but who later told Johnson in a hand-written letter after the election that he had a rather unhappy role to play, that of ultraconservative. 29 The bulk of the money that was being used against Johnson and others was coming from outside the state via 501(c)(3) organizations namely the Facts Forum and CCG which were both receiving tax benefits for themselves and those who were making donations to the organizations. 30 Texas Senator Mike Moroney once described the Facts Forum as the largest and most ambitious propaganda machine ever set up in this country. 31 What is important is that the Johnson Amendment was prompted by Johnson s desire to challenge McCarthyism, protect the liberal wing of the Democratic Party in Texas, and win re-election. 32 But whatever his motive, [f]our months prior to elections, without a hearing or debate, LBJ forced an amendment on the Senate floor to prohibit all non-profit groups from engaging in political campaigning or electioneering. LBJ received only sparse opposition in 1954, as many of his peers were eager to extinguish McCarthyism and the Red hunt once and for all Aaron Tyler, Preserving the Moral Compass: House of Worship Speech Protection Act Is Defeated, 45 J. CHURCH & ST. 717, 720 (Oct. 1, 2003). 28. Id.; Patrick L. O Daniel, More Honored in the Breach: A Historical Perspective of the Permeable IRS Prohibition on Campaigning by Churches, 42 B.C. L. REV. 733, 742 (2001). 29. O Daniel, supra note 28, at Id. at James D. Davidson, Why Churches Cannot Endorse or Oppose Political Candidates, 40 REV. RELIGIOUS RES. 16, 28 (1998) (quoting THE REPORTER, Nov. 29, 1956). 32. Witham, supra note Tyler, supra note 27, at 721.

8 216 The University of Memphis Law Review Vol. 48 Senator Johnson s motivation for passing the Johnson Amendment seems clear, yet no one seems to precisely know why Congress decided to enact it. It was adopted without debate, committee discussions, or consideration of its effects on churches. 34 Still, whether his intention was to restrict churches or simply to silence those non-profits who opposed him in that election year, the consequences of this restriction have been far-reaching in both the religious and political arenas. It is worth noting that this is the case even though the change was more symbolic than substantive: at the time of passage of the Johnson Amendment, those organizations the IRS defined as charitable arguably already excluded political organizations that would otherwise fall under a different classification. 35 Furthermore, a Republican Congress enacted the thenuncontroversial Johnson Amendment, and a Republican, President Dwight Eisenhower, signed it into law. 36 The ironic fallout for Senator Johnson was that the IRS even questioned the exemption status of religious institutions that favored him over others. During his 1964 run for the presidency, the religious publications of Christian Century and Christianity & Crisis temporarily lost their tax-exempt statuses after they endorsed then-senator Johnson. 37 There are two additional points on this subject that are worth discussing. First, prior to 1954, churches were reluctant to endorse or oppose candidates for fear that, if they went out on political limbs, their actions would reveal political divisions in all except the most homogeneous churches. 38 Intra-church disputes have long been an issue within the United States, leading to protracted litigation that leaves all parties worse for the wear. 39 One standout exception to this 34. Pastors to Protest IRS Rules on Political Advocacy, PEW RES. CTR. (Sept. 19, 2008), See Colinvaux, supra note 13, at (discussing the distinction between charitable and political organizations as a guiding principle for the Johnson Amendment). 36. Jeremy W. Peters, The Johnson Amendment, Which Trump Vows to Destroy, Explained, N.Y. TIMES (Feb. 2, 2017), Davidson, supra note 31, at Id. 39. See generally, e.g., Hosanna-Tabor Evangelical Lutheran Church & Sch. v. EEOC, 565 U.S. 171 (2012) (employment dispute between a teacher and the church

9 2017 To Repeal or Not Repeal 217 rule was Alfred E. Smith, who rallied wide support from a Catholic base that ensured his reelection to the New York governorship and eventual run for President in Still, even this led to a Protestant backlash against what was seen as a Catholic attempt to usurp a Protestant America. 41 Second, even when the tax code says that they cannot be involved in politics, churches have traditionally found a way around the problem. 42 For example, John F. Kennedy s run for office was marked by opposition from Protestant clergy in the National Conference of Citizens for Religious Freedom, and even a sermon from Rev. W.A. Criswell of the First Baptist Church in Dallas, who railed against the idea of a Roman Catholic in the White House. 43 The story goes that H.L. Hunt, the Texas oil tycoon that bankrolled the Facts Forum, had copies of the sermon transcript made and sent to more than a hundred thousand people. 44 In the end, Kennedy was credited with fixing this issue when he addressed Protestant leaders by stating, I believe in an America where the separation of church and state is absolute here no Catholic prelate would tell the President (should he be a Catholic) how to act, and no Protestant minister would tell his parishioners for whom to vote. 45 After a period of quiet, during the late 1980s and early 1990s new legislation pushed the IRS to increase its policing of tax-exempt organizations. In 1987, Representative J.J. Pickle of Texas used his that employed her); see also Jones v. Wolf, 443 U.S. 595 (1979) (dispute over church property following a denominational schism); Serbian Eastern Orthodox Diocese v. Milivojevich, 426 U.S. 696 (1976) (employment dispute between a bishop and his church); Presbyterian Church in United States v. Mary Elizabeth Blue Hull Mem l Presbyterian Church, 393 U.S. 440 (1969) (dispute over title to church property ownership when the vestries of two local churches withdrew from the larger national church organization); Kreshik v. Saint Nicholas Cathedral of Russian Orthodox Church, 363 U.S. 190 (1960) (dispute over use and occupancy of a church building). 40. Robert A. Slayton, When a Catholic Terrified the Heartland, N.Y. TIMES: CAMPAIGN STOPS (Dec. 10, 2011, 4:42 PM), Davidson, supra note 31, at See id. 43. Id. 44. Id. 45. Id.

10 218 The University of Memphis Law Review Vol. 48 position on the House Ways and Means Subcommittee on Oversight to investigate non-profit 501(c)(3) organizations that might have used funds from the sale of Iran-Contra arms to push conservative congressional candidates and fund other lobbying efforts. 46 The result was the passage in 1987 of Internal Revenue Code Section 4912, which stipulates that any organization found to have engaged in substantial lobbying would face a tax on the lobbying expenditures of such organization for such taxable year equal to 5 percent of the amount of such expenditures and has remained in place since. 47 B. Attempts to and Possible Consequences of Amending the Johnson Amendment Many members of Congress have attempted to pass bills that would allow churches and religious organizations to become more involved in the political process, including allowing pastoral endorsements from the pulpit, while maintaining the tax-exempt status of the church or religious organization; all of them have failed. On June 28, 2001, Representative Walter Jones of North Carolina introduced H.R The Houses of Worship Political Speech Protection Act was put forth with the purpose of [a]mend[ing] the Internal Revenue Code to permit a churches and other houses of worship to engage in political campaigns, provided that doing so did not become a substantial part of [its] activities. 48 The bill failed to pass with a vote of on October 2, In 2005, Representative Jones tried again with the Houses of Worship Free Speech Restoration Act of 2005, but it also failed to pass. Its purpose was [t]o amend the Internal Revenue Code of 1986 to protect the religious free exercise and free speech rights of churches 46. Simon Brown, The Persistence of Pulpit Politicking: Will the IRS Finally Crack Down on Unlawful Church Electioneering?, CHURCH & STATE (June 2016), I.R.C. 4912(a) (2012). 48. Houses of Worship Political Speech Protection Act, H.R. 2357, 107th Cong. (2001). 49. Final Vote Results for Roll Call 429, OFFICE OF THE CLERK OF THE U.S. H. OF REPS. (Oct. 2, 2002, 10:47 AM),

11 2017 To Repeal or Not Repeal 219 and other houses of worship. 50 This bill was referred to the Ways and Means Committee, but it never passed, and two years after it was introduced, it officially failed. 51 Rep. Jones introduced nother recent piece of legislation concerning this issue, H.R. 2275, on May 10, 2007, and it was referred to the Ways and Means Committee. 52 Similar to the previous failed bills, the purpose of 2275 was [t]o restore the Free Speech and First Amendment rights of churches and exempt organizations by repealing the 1954 Johnson Amendment. 53 Despite eight co-sponsors joining, including Representatives Jesse Jackson, Jr., Ron Paul, and Duncan Hunter, 54 the bill did not make it out of committee. 55 Although attempts to amend the Johnson Amendment have failed, 56 such a move would not necessarily result in churches or religious organizations being turned into political machines. It would, however, make it easier for religious leaders to speak out clearly about the issues and candidates that shape the lives and affect the futures of millions of people of faith. Conversely, the fact that the Johnson 50. Houses of Worship Free Speech Restoration Act of 2005, H.R. 235, 109th Cong. (2005). 51. H.R. 235 Houses of Worship Free Speech Restoration Act of 2005, CONGRESS.GOV, (last visited Oct. 28, 2017). 52. H.R To Restore the Free Speech and First Amendment Rights of Churches and Exempt Organizations by Repealing the 1954 Johnson Amendment, CONGRESS.GOV, (last visited Oct. 28, 2017). 53. H.R. 2275, 110th Cong. (2007). 54. H.R To Restore the Free Speech and First Amendment Rights of Churches and Exempt Organizations by Repealing the 1954 Johnson Amendment, CONGRESS.GOV, (last visited Oct. 28, 2017). 55. H.R To Restore the Free Speech and First Amendment Rights of Churches and Exempt Organizations by Repealing the 1954 Johnson Amendment, CONGRESS.GOV, (last visited Oct. 28, 2017). 56. See Stephanie Strom, The Political Pulpit, N.Y. TIMES (Sept. 30, 2011), ( This weekend, hundreds of pastors, including some of the nation s evangelical leaders, will climb into their pulpits to preach about American politics, flouting a decades-old law that prohibits tax-exempt churches and other charities from campaigning on election issues. ).

12 220 The University of Memphis Law Review Vol. 48 Amendment is only observed in the breach means that, on a practical level, no one s speech is actually being chilled. Regardless, the fate of the Johnson Amendment has lingered at the forefront of political discourse on religious freedom, so the next section will delve into the modern interpretation and enforcement of the Act. C. Modern Interpretation and Enforcement of the Johnson Amendment 1. IRS Guidance and Practice The modern wave of increased attention to regulating the political activity of 501(c)(3) organizations began in 2004 with the creation of the Political Activities Compliance Initiative. 57 This Initiative consisted of the IRS sending letters and news releases to all interested parties the agency deemed to be at risk of violating the amendment. 58 For the 2008 election cycle, and in subsequent election cycles, the IRS merely reiterated their goals for preventing violations of the restrictions of 501(c)(3) of the Tax Code; a letter from Lois G. Lerner ( Ms. Lerner ), for example, then Director of the Exempt Organizations section of the IRS, stated that the IRS sought to educate and provide guidance to the public, relevant communities, and organizations while maintaining a meaningful enforcement presence on this topic. 59 Education and enforcement are thus the two arms of 57. See generally Letter from Lois G. Lerner, Dir., Exempt Orgs., Tax Exempt and Gov t Entities Div., Internal Revenue Serv., Dep t of the Treasury, to Marsha Ramirez, Dir., Examinations, Rob Choi, Dir., Rulings & Agreements, and Bobby Zarin, Dir., Customer Educ. & Outreach, Tax Exempt and Gov t Entities Div., Internal Revenue Serv., Dep t of the Treasury (Apr. 17, 2008), [hereinafter Letter from Lerner]. 58. The IRS sent letters to national political party committees outlining the scope of Section 501(c)(3) as it relates to political activity. The IRS also noted that the FEC s monthly newsletter contained guidance for candidates to help them avoid imperiling the tax-exempt status of charities. Press Release, IRS, IRS Continues Program on Political Campaign Activity by Charities; Stresses Education and Enforcement (Apr. 17, 2008), Letter from Lerner, supra note 57, at 1.

13 2017 To Repeal or Not Repeal 221 the IRS s Exempt Organizations ( EO ) division. 60 Ms. Lerner wrote, As in the past, this committee of career civil servants with extensive EO tax law experience will continue to determine which cases to pursue, and the project coordinator will help ensure consistency. 61 The section of the IRS website pertaining to 501(c)(3)s and the restrictions placed upon them concerning political involvement lists the requirements for classification as a tax-exempt organization. 62 A 501(c)(3) organization cannot be an action organization, meaning that it may not attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates. 63 Another section entitled The Restriction of Political Campaign Intervention by Section 501(c)(3) Tax-Exempt Organizations provides a list of more specific activities that directly violate the regulation. 64 For instance, [c]ontributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity. 65 In addition, any educational activity which has evidence of bias constituting favor of one candidate over another or opposition to any candidate would be prohibited participation or intervention. 66 The site further explains that, even if the bias is not overt, but only ha[s] the effect of favoring a candidate or group of candidates, the IRS will still find an organization in violation of the provision Id. at Id. at Exemption Requirements 501(c)(3) Organizations, IRS, (last updated Aug. 27, 2017) [hereinafter Exemption Requirements]. 63. Id. 64. The Restriction of Political Campaign Intervention by Section 501(c)(3) Tax-Exempt Organizations, IRS, (last updated Sept. 13, 2016) [hereinafter Section 501(c)(3) Restrictions]. 65. Id. 66. Id. 67. Exemption Requirements, supra note 62.

14 222 The University of Memphis Law Review Vol. 48 Not every possible manner of political involvement, however, is so clearly forbidden. The IRS itself states that the prohibition of [c]ertain activities or expenditures would have to be taken in context of the surrounding facts and circumstances. 68 If nonprofits act in a non-partisan manner, they will likely be acceptable. 69 Examples of approved activities include certain voter education activities (including presenting public forums and publishing voter education guides). 70 In June 2007, the IRS released Revenue Ruling , which examined twenty-one examples that illustrate the application of the rule to help determine whether a 501(c)(3) organization s actions violate restrictions on political intervention. 71 The purpose of this ruling was to give exempt organizations a clear idea of what constitutes a violation of the law. 72 The twenty-one situations described in the ruling are divided into seven categories, such as Voter Education, Voter Registration and Get Out the Vote Drives and Issue Advocacy vs. Political Campaign Intervention. 73 Two examples from the ruling are Situations 5 and 9: Situation 5. Minister C is the minister of Church L, a section 501(c)(3) organization and Minister C is well known in the community. Three weeks before the election, he attends a press conference at Candidate V s campaign headquarters and states that Candidate V should be reelected. Minister C does not say he is speaking on behalf of Church L. His endorsement is reported on the front page of the local newspaper and he is identified in the article as the minister of Church L. Because Minister C did not make the endorsement at an official church function, in an official church publication 68. Section 501(c)(3) Restrictions, supra note See id. 70. Id. 71. Rev. Rul , C.B Political Campaign Intervention by 501(c)(3) Tax-Exempt Organizations Educating Exempt Organizations, IRS, (last updated Aug. 27, 2017). 73. Rev. Rul , C.B

15 2017 To Repeal or Not Repeal 223 or otherwise use the church s assets, and did not state that he was speaking as a representative of Church L, his actions do not constitute campaign intervention by Church L..... Situation 9. Minister F is the minister of Church O, a section 501(c)(3) organization. The Sunday before the November election, Minister F invites Senate Candidate X to preach to her congregation during worship services. During his remarks, Candidate X states, I am asking not only for your votes, but for your enthusiasm and dedication, for your willingness to go the extra mile to get a very large turnout on Tuesday. Minister F invites no other candidate to address her congregation during the Senatorial campaign. Because these activities take place during official church services, they are attributed to Church O. By selectively providing church facilities to allow Candidate X to speak in support of his campaign, Church O s actions constitute political campaign intervention. 74 According to the Holdings section of the document, a little over half of the situations addressed would not constitute a violation. 75 Despite the purpose of the ruling, these results suggest that applicable standards are so vague that a single misstep could potentially decimate a church. Additionally, much of the IRS s Tax Guide for Churches and Religious Organizations: Benefits and Responsibilities under the Federal Tax Law reiterates what is on the IRS website; 76 however, it also goes into more detail as to what types of organizations constitute a church. 77 In practice, the IRS later uses this vague guidance to 74. Id. 75. Id. 76. See generally IRS, U.S. DEP T OF TREASURY, PUB. NO. 1828, TAX GUIDE FOR CHURCHES & RELIGIOUS ORGANIZATIONS 1 18, (last visited Feb. 24, 2017) [hereinafter TAX GUIDE]. 77. TAX GUIDE, supra note 76, at 33.

16 224 The University of Memphis Law Review Vol. 48 determine an entity s eligibility for an exemption, 78 putting wellmeaning religious institutions right in the federal government s crosshairs. 2. IRS Enforcement of Violations The IRS states that [v]iolating [certain] prohibition[s] may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes. 79 An excise tax is [a] tax imposed on the manufacture, sale, or use of goods (such as a cigarette tax), or on an occupation or activity (such as a license tax or an attorney occupation fee). 80 While the IRS has published many documents educating 501(c)(3) organizations about the restrictions on political involvement, there are instances in which the IRS does not follow and enforce the provisions as they were written and intended, even in those cases in which the guidelines would seem to give clear instructions. Following the 1987 change in the IRS regulations, for example, some high-profile crackdowns occurred. Most notably, the IRS investigated Reverend Jerry Falwell s Old Time Gospel Hour over a four-year period, leading to his organization paying $50,000 in back taxes in 1993 and retroactively losing its tax-exempt status for 1986 and 1987 due to having engaged in partisan activity. 81 In Branch Ministries v. Rossotti, the Court of Appeals for the D.C. Circuit outlined the procedure that the IRS follows to determine whether a church has violated the requirements for tax-exemption and 78. See generally Erik W. Stanley, LBJ, The IRS, and Churches: The Unconstitutionality of the Johnson Amendment in Light of Recent Supreme Court Precedent, 24 REGENT U. L. REV. 237, (2011). See also, e.g., S-C-C, Non- Precedent Decision of the Administrative Appeals Office, U.S. Citizenship and Immigration Servs. 4 n.2 (Oct. 31, 2017), %20Immigrant%20Religious%20Workers/Decisions_Issued_in_2017/OCT312017_ 01C1101.pdf (describing IRS use of the Tax Guide to adjudicate questions of exempt status of religious organizations). 79. See Section 501(c)(3) Restrictions, supra note Excise, BLACK S LAW DICTIONARY (8th ed. 2004). 81. See generally David E. Anderson, Jerry Falwell s Ministry Fined for Taking Role in Politics, WASH. POST (Apr. 10, 1993),

17 2017 To Repeal or Not Repeal 225 whether revocation of their status is necessary. 82 The court explained the process, noting that there are special restrictions on the IRS s ability to investigate the tax status of a church: the Church Audit Procedures Act ( CAPA ) sets out the circumstances under which the IRS may initiate an investigation of a church and the procedures the agency must follow in such an investigation. 83 When a high-level Treasury official develops a reasonable belief that a church may not qualify for an exemption pursuant to 501, the IRS has statutory authority to undertake a church tax inquiry. 84 If the inquiry does not produce satisfactory results, the IRS may continue with the second level of investigation: a church tax examination. 85 In this part of the investigation, the IRS examines the organization s records and activities to determine whether the organization is a church for taxation purposes. 86 The Tax Guide for Churches and Religious Organizations: Benefits and Responsibilities under the Federal Tax Law offers a more specific analysis of the IRS s mode of inquiry. It contains a section entitled Special Rules Limiting IRS Authority to Audit a Church, which discusses when the IRS may conduct further investigations into a 501(c)(3) organization or an organization that is applying for such status. 87 This section of the guide states that investigations into a church s tax status can only occur after the Director of Exempt Organizations Examinations reasonably believes, based on a written statement of the facts and circumstances, that the organization: (a) may not qualify for the exemption or (b) may not be paying tax on an unrelated business or other taxable activity. 88 The section also describes the audit process, informing churches that, if a reasonable belief exists, and the IRS notifies the church of its inquest, then the church has time (typically 90 days) to respond and explain the issues that have caused the inquiry. 89 If the investigation is not complete, or the church fails to respond, the IRS sends a second 82. Branch Ministries v. Rossotti, 211 F.3d 137, (D.C. Cir. 2000). 83. Id. (citing I.R.C. 7611). 84. Id. at 140 (citation omitted). 85. Id. 86. Id. 87. TAX GUIDE, supra note 76, at Id. 89. Id. at 32.

18 226 The University of Memphis Law Review Vol. 48 letter. 90 At this point, the organization can meet with a representative from the IRS to discuss the issue. 91 Once the examination begins, it must end within two years after the IRS sends the second letter. 92 This process does not always reach the examination stage, and in many instances the IRS finds that there has been no grievous violation that would constitute grounds for revocation of the organization s taxexempt status. 93 According to the letter from Ms. Lerner to three other directors within the IRS, the goals for enforcement were two-fold. 94 The letter directed the focus of the Political Activities Compliance Initiative ( PACI ) to allegations of more egregious violations and the cases that result from them. 95 The four types of cases which the letter said needed close monitoring are those that involved issue advocacy and potential campaign intervention, internet cases in which an organization s website links to other organizations websites in a way that would violate the Johnson Amendment, potential campaign contributions by 501(c)(3) organizations, and 501(c)(4) organizations making political expenditures in lieu of political action committees. 96 Notably, the letter itself acknowledges some of the inherent ambiguities in the IRS s guidance and interpretations of the Code. The letter cites the situations covered in Revenue Ruling and states that the IRS has faced situations that are not immediately answerable by the holdings of those hypothetical violations. 97 In addition, the letter states that the EO should be ready to face specific taxpayer challenges, which may lead to court Throughout Ms. Lerner s letter, she often repeats the mantra that the PACI will examine reports of violations within the context of the facts and circumstances of each instance. 99 This leads one to assume that the law may not be as clear as the IRS would hope and that 90. Id. 91. Id. 92. Id. 93. See id.; infra Section II.C See Letter from Lerner, supra note 57, at Id. at Id. at Id. at 2; cf. Rev. Rul , supra note Letter from Lerner, supra note 57, at See generally id. at 2 3.

19 2017 To Repeal or Not Repeal 227 the volumes of educational resources it produced do not fully cover the potential spectrum of this regulation. In fact, when investigating Internet cases, Ms. Lerner even goes so far as to deem such arbitrary facts as the number of clicks that separate the objectionable material from the 501(c)(3) s Web site to be a significant consideration as to whether there has been a violation. 100 The IRS guidance is not helpful for churches seeking to follow the law. The guidance is vague and expressly states that the IRS would determine on a case-by-case basis whether to enforce 501(c)(3) regulations, with a careful review of the specific facts found in each situation. Such unclear guidance, in turn, leads to toothless threats of litigation and sporadic and unreliable enforcement. 3. Current and Recent Litigation Resulting in Revocation of Tax- Exempt Status of Church The court in Branch Ministries v. Rossotti discussed the first instance in which the IRS ever revoked an organization s tax-exempt status for violating the rules of tax-exemption. The D.C. Circuit affirmed the revocation in 2000, a full 46 years after Congress enacted the Johnson Amendment. 101 The court recounted the facts are as follows: Four days before the 1992 presidential election, Branch Ministries, a tax-exempt church, placed full-page advertisements in two newspapers in which it urged Christians not to vote for thenpresidential candidate Bill Clinton because of his positions on certain moral issues. 102 Branch Ministries was the organization that operated the Pierce Creek Church in New York. 103 It accepted donations from people across the nation in support of the two advertisements, which it published in USA Today and The Washington Times. 104 The Church s attempt to influence the presidential campaign prompted an inquiry by the IRS in 1992, which led to a church tax examination from 1993 to 1995 that ended in the revocation of the Church s tax-exempt status in January Upon losing its tax Id. at Branch Ministries v. Rossotti, 211 F.3d 137, 139 (D.C. Cir. 2000) Id Id. at Id Id.

20 228 The University of Memphis Law Review Vol. 48 exempt status, the church and its pastor filed suit, alleging that the IRS had acted beyond its statutory authority,... the revocation violated [the church s] right to free exercise of religion guaranteed by the First Amendment and the Religious Freedom Restoration Act, and [that the church] was a victim of selective prosecution in violation of the Fifth Amendment. 106 The D.C. Circuit focused mainly on the Church s allegation that the revocation of its tax-exempt status was an infringement upon the Church s rights under the First Amendment and RFRA. 107 The Church contended that revocation of its tax-exempt status would threaten its existence and would make its members reluctant to contribute the funds essential to its survival. 108 In response to these concerns, the D.C. Circuit held that, [b]ecause of the unique treatment churches receive under the Internal Revenue Code, the impact of the revocation is likely to be more symbolic than substantial. 109 The church can still consider itself a church and even be a 501(c)(3) organization with all benefits that come with that classification. 110 The only difference is that, when donors are audited after the revocation, they have the burden to show that the donee is in fact a church, instead of receiving the presumption of that fact which is given with a tax-exempt status classification. 111 The court found the church s selective-prosecution claims to be baseless, and it affirmed the lower court s summary judgment decision in favor of the IRS. 112 Branch Ministries was the first case ever that involved the IRS revoking the tax-exempt status of a bonafide church pursuant to the Johnson Amendment. 113 As the next section demonstrates, the IRS ignores the vast majority of violations Id. at Id. at Id. at Id Id See id Id. at Branch Ministries v. Rossotti, GEORGETOWN UNIV.: BERKLEY CTR. FOR RELIGION, PEACE & WORLD AFFAIRS, (last visited Sept. 11, 2017).

21 2017 To Repeal or Not Repeal Situations That Did Not Result in Revocation of Church s Tax- Exempt Status According to the Alliance Defending Freedom ( ADF, formerly the Alliance Defense Fund), there have been no reported revocations of a church s tax-exempt status or other punishment to date despite the IRS s strict interpretation of the tax code for sermons delivered from the pulpit, 114 which is distinct from Branch Ministries losing its status for evaluating candidates for office in light of Scripture. In the 2006 Political Activities Compliance Initiative report, the IRS gives statistical results from the investigations it conducted in the 2004 and 2006 election cycles due to reported violations of the tax code. 115 The report compares the results of 2006 to those of 2004, showing that, although there were 237 reported violations in 2006, compared to 166 reported in 2004, the IRS only examined 100 and 110 in those years, respectively. 116 The report also lists statistics for types of alleged violations: organizations printing and distributing documents in support of candidates; official statements made during normal services; candidates speaking at official functions; distribution of improper voter guides or candidate ratings; posting signs on organization properties endorsing candidates; posting on organization websites; official verbal endorsement; organizations making political contributions to a candidate; allowing a non-candidate to endorse a candidate during a speech at an organization event; and use of organization facilities for a political campaign event. 117 Despite these allegations and examinations, the IRS investigations that eventually closed found that despite those confirmed violations that concerned church involvement in political activity not one time did the IRS revoke the church s tax-exempt status. 118 In 2004, there were 42 instances in which the IRS found that [p]olitical intervention [was] substantiated, and in 2006 there were 114. PULPIT INITIATIVE EXEC. SUMM., supra note IRS, 2006 POLITICAL ACTIVITIES COMPLIANCE INITIATIVE 1 (May 30, 2007) [hereinafter 2006 PACI REPORT], Id Id. at Id. at 5.

22 230 The University of Memphis Law Review Vol. 48 four instances of the same. 119 Despite the IRS stating unequivocally that such political involvement is absolutely prohibited, 120 however, only a written advisory [was] issued in each of those cases. 121 An example of a situation in which the IRS carried out an inquiry and investigation following church politicking occurred in the case of the All Saints Episcopal Church in Pasadena, California. 122 While the pastor, the Reverend George F. Regas, did not specifically endorse a candidate for president, he gave a sermon two days before the 2004 election that criticized the Iraq war and then-president George W. Bush s tax cuts. 123 The IRS told the Church it needed to produce all political documents and materials created in The Church responded to the IRS stating that it would not comply with the orders and would not send the documents. 125 The IRS offered not to pursue the case if the church would admit wrongdoing and agree not to hold similar sermons in the future, but All Saints refused. 126 Reverend Barry Lynn of Americans United for Separation of Church and State suggested that the IRS s treatment of churches was not equal. 127 He offered the example of a Baptist preacher in Arkansas who gave a sermon that was critical of then-candidate John Kerry and supportive of President George W. Bush that did not elicit an IRS investigation. 128 Eventually, the IRS determined that revocation of All Saints tax-exempt status was not necessary. On September 10, 2007, almost three years after the sermon in question, the IRS notified the church that, although it did violate the tax code when Reverend Regas gave 119. Id Section 501(c)(3) Restrictions, supra note PACI REPORT, supra note 115, at Celeste Kennel-Shank, IRS vs. Pulpit, SOJOURNERS, Feb. 2006, Id Louis Sahagun, Church Votes to Fight Federal Probe, L.A. TIMES, Sept. 22, 2006, at B Id IRS Audits Church for Anti-War Sermon, CTR. FOR EFFECTIVE GOV T (Nov. 15, 2015), See id. ( Barry Lynn said that while he could understand why the IRS might question the All Saints sermon, he cannot understand why the tax agency did not take the same view about an even more partisan sermon by a Baptist pastor in Arkansas who preached on the successes of George Bush. ) 128. Id.

23 2017 To Repeal or Not Repeal 231 his anti-war sermon, it would be able to retain its tax-exemption. 129 The IRS, however, failed to explain the reasoning behind its decision. 130 This constant back and forth exposes the ongoing enforcement problem that the Johnson Amendment poses: vague rules with vague guidance breeds inconsistency and disparate treatment. D. ADF Pulpit Initiative On September 28, 2008, the ADF conducted a nationwide event called Pulpit Freedom Sunday. 131 That day, pastors who were involved in the event gave Scripture-based sermons from the pulpits comparing and contrasting the differing positions of the presidential candidates. 132 The pastors discussed important issues in the 2008 election year and talked about candidates stances on those issues. 133 This was a planned violation of the Johnson Amendment. 134 The purpose of the initiative was to create litigation stemming from the violations that would allow the court system to deem this provision of the tax code unconstitutional under the Free Speech Clause of the First Amendment. 135 Specifically, the ADF designed Pulpit Freedom Sunday with a narrow purpose and only intended for the event to involve what pastors preached on the day of the event not get-out-the-vote campaigns or partisan activities. 136 The ADF stated that the reasoning behind the initiative was not to promote any candidates or to encourage churches 129. Rebecca Trounson, IRS Ends Church Probe but Stirs New Questions, L.A. TIMES (Sept. 24, 2007), Id PULPIT INITIATIVE EXEC. SUMM., supra note 7. See also generally Strom, supra note PULPIT INITIATIVE EXEC. SUMM., supra note Press Release, All. Def. Freedom, Pulpit Freedom Sunday (Sept. 25, 2008) [hereinafter PFS Press Release], PULPIT INITIATIVE EXEC. SUMM., supra note Id. at 2. See generally U.S. CONST. amend. I ( Congress shall make no law... abridging the freedom of speech.... ) All. Def. Fund, The Alliance Defense Fund Pulpit Initiative: What It Is What It s Not, THE BLACK ROBE REGIMENT, (last visited Nov. 3, 2017) [hereinafter All. Def. Fund, Pulpit Initiative: What It Is].